Australian court deals blow to global tobacco giants

CANBERRA (Reuters) - Australia called on the world to match its tough new anti-tobacco marketing laws after its highest court on Wednesday dismissed a challenge from global cigarette companies, although few of Asia's emerging economies appeared likely to follow suit.

The decision means that - starting in December - cigarettes and tobacco products must be sold in plain olive green packets without special colorful branding. Instead, packages must display graphic health warnings including pictures of mouth cancer and other smoking-related illnesses.

Tobacco giants British American Tobacco, Britain's Imperial Tobacco, Philip Morris and Japan Tobacco challenged the laws in Australia's High Court, claiming the rules were unconstitutional because they effectively extinguished their intellectual property rights.

In a brief statement, the High Court said a majority of its seven judges believed the laws did not breach Australia's constitution. A full judgment will be released later.

The laws are in line with World Health Organization recommendations and are being watched closely by Britain, Norway, New Zealand, Canada and India, who are considering similar measures to help fight smoking.

The World Health Organization estimates that more than 1 billion people around the world are regular smokers, with 80 percent in low- and middle-income countries.

Australian Attorney-General Nicola Roxon hailed the ruling as "a watershed moment for tobacco control around the world".

"The message to the rest of the world is big tobacco can be taken on and beaten," said Roxon, whose father, a smoker, died of cancer when she was 10.

"Without brave governments willing to take the fight up to big tobacco, they'd still have us believing that tobacco is neither harmful nor addictive," she said after the ruling.

In Indonesia, the government said it would like to follow Australia's example. "That's excellent ... this is one way to protect the people," Health Minister Nafsiah Mboi told Reuters.

However, an anti-tobacco campaigner said that would be difficult to achieve because of a strong industry lobby in Indonesia.

Tulus Abadi, head of the national commission on tobacco control, said there had been little movement from the government on a draft law to include graphic warnings on cigarette packets like those in Australia.

Indonesia's approximately 65 million smokers consumed about 230 billion cigarettes in 2010. Cigarette packages there currently carry a written warning about the health dangers of smoking.

Graphic images of cancers and gum disease are also shown on packets in Thailand, where official figures showed 13 million adults smoked tobacco in 2011, including 46.6 percent of men.

An official at the Thai Ministry of Public Health, who asked not to be identified, said there were no plans to change existing packaging laws.

In India, where an estimated 175 million people smoke, there was no immediate official reaction. In June, the country's most populous state of Uttar Pradesh increased the value-added tax on cigarettes to 50 percent from 17.5 percent. Analysts say other states are likely to follow.

New Zealand's Associate Health Minister Tariana Turia said the decision gave New Zealand more confidence to push ahead with its planned plain-packaging measures.

BLACK MARKET

The Australian decision is still a blow to tobacco companies and ends any domestic Australian challenges to plain packaging. British American Tobacco Australia said the measures would fuel a black market for cigarettes.

"It's still a bad law that will only benefit organized crime groups, which sell illegal tobacco on our streets," BAT Australia spokesman Scott McIntyre said after the decision, his comments echoed by other companies involved.

McIntyre, however, said the company would comply with the laws.

Industry analysts are worried that plain-package laws could spread to emerging markets such as Brazil, Russia and Indonesia and threaten sales growth. The court's decision was welcomed by anti-smoking groups.

"We hope other nations follow Australia's lead and eliminate the use of tobacco packaging as a marketing tool, to help reduce the global tobacco death toll -- which is on track to reach half a billion people this century," said Australia's Cancer Council chief executive Ian Olver.

CHALLENGES REMAIN

The plain packaging rules do, however, still face a number of challenges under global trade rules.

Australia is already fighting trade complaints in the World Trade Organization (WTO) from Ukraine, Honduras and the Dominican Republic, which claim the laws unfairly restrict trade, although their trade with Australia is negligible.

Philip Morris also said it would launch a legal challenge against the laws under a bilateral Australia-Hong Kong investment agreement.

"There is still a long way to go before all the legal questions about plain packaging are fully explored and answered," PML spokesman Chris Argent said in a statement.

Companies could also use a proposed new Trans Pacific Partnership (TPP) trade deal to mount a further challenge if the TPP agreement includes controversial investor-state dispute settlement provisions.

Australia strongly opposes lobbying by big business to include such provisions in the TPP because that would undermine the ability of a government to pass domestic laws.

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